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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Contingent liabilities

Reynolds American, Inc., has numerous pages dedicated to describing contingent liabilities in the notes to recent financial statements. These pages include extensive descriptions of multiple contingent liabilities. Use the Internet to research Reynolds American, Inc., at www.reynoldsamerican.com.

  1. a. What are the major business units of Reynolds American Inc.?
  2. b. Based on your understanding of this company, why would Reynolds American require so many pages of contingency disclosure?

A.

To determine

Contingent liability:  It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future:

  • Remote
  • Reasonably possible
  • Probable

To state: the major business units of Incorporation R.

Explanation

Incorporation R is a parent company that owns a number of subsidiaries...

B.

To determine

To explain: the reason for Incorporation R requiring so many pages of contingency liabilities.

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